Abstract
This paper presents estimates of the parameters of a consumption function for u.s. quarterly, seasonally unadjusted data on non-durables, services, and durables. The theoretical novelty in the approach we present is in the derivation of the consumption function from an underlying many-goods allocation problem. Applying this model with an appropriate estimator to the data we find: (i) the (homogeneity) restrictions suggested by theory are not rejected, (ii) there is no evidence of excess sensitivity to income, (iii) there is no evidence to suggest that agents cannot adjust their durable stocks as they would wish, and (iv) the intertemporal substitution elasticity is not well determined.
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